Monte dei Paschi CEO goes as cash call looms

Friday, September 09, 2016 - 01:53

Fabrizio Viola is to step down as CEO of Monte dei Paschi ahead of a 5 billion euro cash call. Will it be enough to persuade investors they should back efforts to save Italy's third-largest bank from being wound down? Ivor Bennett reports.

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His tenure is one many investors would perhaps rather forget.
Fabrizio Viola overseeing Europe's oldest bank also become its weakest after July's stress test put it bottom of the pile.
But after two failed recapitalisation bids, he's now decided he won't be in charge for the third.
Standing down as CEO of Italian bank Monte dei Paschi.
(SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING:
"Yes they had that 5 billion euro bailout in July. But is it material enough to turn round the business? Thus far, their share price is very, very depressed suggests that investors have concluded that it isn't. And therefore the CEO has to carry the can."
The bank was founded in 1472.
But it's the recent history that investors care about now.
28 billion euros in bad loans.
A share price that's fallen nearly 90 percent in the last 12 months.
(SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING:
"Clearly an awful lot of the loan book is out to corporates whose ability to repay is predicated on profit and growth. And actually if the macro economy doesn't perform, then the Italian banking system is held below the water line and taking in water at a rapid rate."
Monte dei Paschi hopes a 5-billion-euro share sale will give it some breathing space.
But for some, any deus ex machina will come from Brussels.
(SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING:
"What the eyes of most investors will be on will be whether Matteo Renzi and the Italian government can make the case to the European commission that actually state aid is warranted in this case."
The bank has reportedly already lined up a new CEO - the current head of Bank of America's Italian arm
But what uncertainty there is will not go down well in a sector that is itself shouldering almost 200 billion euros of bad loans.

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